Dollar weakens as markets await FED QE2 decision on Wednesday

Pound:  
The British Pound bounced back from a low of 1.5877 on Friday morning to push through 1.60 by late trade in London and hold above this level over the weekend on an improved outlook for the region, and renewed USD weakness. As growth prospects improve, the Bank of England is likely to maintain its current policy in Novem-ber, and the British Pound may strengthen over the following week as investors curb speculation for another expansion in quantitative easing. As a result, we expect the GBP/USD to continue to move higher   and we could see a test of 1.6230-40, the 23.6% Fib from the 2009 low to high. Against the Euro, the pound also per-formed well, moving above 1.15 but falling back a little this morning. Data out today in the UK is thin with PMI out for October and the Hometrack house price survey being released.
DATA : UK PMI (OCT), Hometrack survey (OCT)    
   
 

Euro:   
The Euro will take direction this week from events across the pond but the outlook for the single currency area seems to be deteriorating. European Central Bank President Jean-Claude Trichet said fiscal imbalances in the euro-region could spark a “sudden” drop in confidence during an interview with Politis, and argued that “implementing a sound fiscal policy is a necessary preconditions for achieving sustainable growth in the long run” as the governments operating under the fixed-exchange rate system struggle to manage their public fi-nances. As the ECB aims to encourage a sustainable recovery, we expect the central bank to maintain a neutral policy stance throughout the remainder of the year something that could prove damming if the sovereign debt bug bites again. Against the Pound, the currency is on the back foot, falling from recent highs but is gaining ground against the USD with trades positioning themselves ahead of a massive week for the Dollar. A brief test of 1.40 overnight didn’t stick but we expect to see the rate back above the figure as the USD remains well of¬fered against its largest counterpart. No data today as Italian and French markets closed for All saints day.
DATA : No Data            
            
 

General:  China's official purchasing managers' index (PMI) for manufacturing rose to a six-month high of 54.7 in October from 53.8 in September, blowing past expectations and highlighting the strength of the world's sec¬ond-largest economy.            

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